Car - VW wants to invest billions in electric car company Rivian
Volkswagen relies on Rivian, Tesla's electric vehicle challenger, for help with electric cars and hands over billions. Europe's largest automaker plans to invest up to five billion dollars and develop technology for future vehicles together. For Rivian, this is a much-needed cash injection: The company is still writing red numbers and is currently facing declining interest in electric cars in the USA.
The struggling Rivian stock soared by nearly 60% in after-hours trading on Tradegate on Wednesday morning. However, Volkswagen papers went down slightly in the Xetra trading in the morning. A stock market participant noted that the outflow could be burdensome. However, in the long run, this decision could make strategic sense if the project is successful.
The cooperation is quite focused: software, steering computers, and network architecture. A key point: Volkswagen will lean on Rivian's technology and software for new cars in the second half of the decade. The automaker could save a lot of money compared to developing the technology in-house. Rivian CEO RJ Scaringe emphasized in a phone conference on Tuesday that other areas like batteries or drive technology were not part of the partnership.
To offer new functions, cars have been accumulating more and more control units and longer cable networks for years. With the advance of electric vehicles, a competition in vehicle architectures has also begun. Trends: less complexity and a focus on software. Tesla was a pioneer - a computer on wheels.
Rivian's architecture: Zonal model instead of many smaller computers
Rivian developed its own architecture from the start, in which the auto electronics are divided into several zones with their own computers. In the first generation of the Rivian platform, 17 of these control units were necessary, Scaringe said. Now, for the second generation, the number has been reduced to seven.
Volkswagen has had problems with software development for electric cars in-house for years, causing model launches to be delayed. Scaringe touched on this topic during the phone conference on Tuesday. He noted that established manufacturers have had difficulties with their own software in recent years.
He sees the reason for this in how the automotive business has run for decades: a lot of technology was bought from various suppliers, "as a result, one had a multitude of smaller computers that were bound to specific functions." When one comes from this world, it is difficult to develop an architecture according to the zonal principle, in which a control unit takes over functions across multiple areas. Rivian distributes these ECUs (Electronic Control Units) throughout the vehicle to shorten the data transfer path.
Expert: A bargain for VW
Rivian is one of the fewer manufacturers to have such a zone architecture in series production - and valuable for VW, commented the auto analyst from market research firm Gartner, Pedro Pacheco. Considering how much money Volkswagen has already invested in the development of its own platform, the billions for Rivian are "a real bargain" for the German concern. The deal also sends a signal that things, which one used to develop themselves, can now come from another manufacturer. At the same time, Pacheco raised the question of what manufacturers do with their own automotive software teams when they buy so much.
Analyst Stephen Reitman from financial firm Bernstein told financial service Bloomberg that the deal is another "nail in the coffin" for Volkswagen's ambitions to develop software platforms in-house. With the partnership, the Wolfsburg-based company gains valuable technology access.
Rivian and VW's plan involves a joint venture where development will be carried out for both manufacturers. The billions will flow to Rivian gradually. First, VW purchases a billion-dollar bond. With the bond, Rivian obtains fresh capital initially. Volkswagen, as the buyer of the bond, can then exchange it for options in Rivian stocks. If the joint development lab comes into being, Volkswagen pays an additional billion, buys two billion dollars' worth of stocks in 2025 and 2026, and provides an additional billion as a loan.
Volkswagen has faced increasing difficulties in its aggressive course towards electromobility. In Europe, demand is weak, and competition in China with affordable domestic manufacturers is fierce. In the USA, Volkswagen aims to gain significant market shares with electric cars and has already announced substantial investments.
1.45 billion Dollar Loss with 13,600 Deliveries
Rivian delivered approximately 13,600 electric vehicles in the previous quarter and generated 1.2 billion dollars in sales while incurring a loss of 1.45 billion dollars. The company is active in two popular vehicle categories in the USA: large SUVs and pickups. Rivian also builds electric delivery vehicles for Amazon, which are now visible in Europe as well. The world's largest online retailer is also an investor.
The mood among Tesla challengers, who hoped for an increasingly faster pace in electric vehicle sales, is subdued. In the USA, many buyers are currently opting for hybrid models, even at Tesla, where growth has suddenly stalled. The company Fisker had to file for bankruptcy. Its Ocean SUV model came to market with delays and caused frustration for some buyers and testers with software issues.
Pacheco's Statement on LinkedIn Rivian's Shareholder Brief Rivian's Conference Call
- Volkswagen, under financial and technological partnership with Rivian, aims to develop future vehicles and potentially save significant money compared to developing the technology in-house.
- Rivian, a US-based electric vehicle challenger to Tesla, has faced declining interest in electric cars in the USA, as evidenced by its continuous financial losses.
- Rivian's unique architecture is a zonal model, with separate computers for each auto electronics zone, reducing the number of control units needed compared to their first-generation platform.
- Experts, such as Pedro Pacheco from Gartner, consider Volkswagen's investment in Rivian a "bargain" due to the valuable technology and architecture Rivian possesses.
- Volkswagen and Rivian plan to establish a joint venture for shared development efforts, with billions being invested gradually, including a billion-dollar bond exchangeable for options in Rivian stocks.
- Europe's automotive market, where Volkswagen is the biggest player, faces increasing difficulties, including weak demand for electric vehicles while facing competition from Chinese manufacturers.
- In the USA, Volkswagen targets gaining significant market shares with electric cars, despite the subdued mood among Tesla challengers due to delayed product launches and software issues faced by companies like Fisker.
